MEDICAL PRACTICE PARTNERSHIP AGREEMENT
(Texas – Physician-Owned)
[// GUIDANCE: This template is designed for a multi-physician partnership that will own and operate a medical practice in Texas. It assumes all partners are individuals who hold an active and unrestricted Texas medical license. Customize bracketed placeholders, optional provisions, and schedules before execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Formation, Purpose, and Term
- Capitalization; Profits, Losses & Distributions
- Management & Voting
- Professional Responsibility & Compliance
- Insurance Requirements
- Transfer Restrictions; Buy-Out & Withdrawal
- Representations & Warranties
- Covenants
- Events of Default & Remedies
- Risk Allocation
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
MEDICAL PRACTICE PARTNERSHIP AGREEMENT (this “Agreement”) is entered into and made effective as of [EFFECTIVE DATE] (the “Effective Date”), by and among the following Texas-licensed physicians (each, a “Partner,” and collectively, the “Partners”):
• [PARTNER NAME 1], M.D., Texas Medical License No. [__]
• [PARTNER NAME 2], M.D., Texas Medical License No. [____]
• [ADDITIONAL PARTNERS, IF ANY]
Recitals
A. The Partners desire to associate as a partnership pursuant to the Texas Business Organizations Code (“TBOC”) and Tex. Occ. Code §§ 151.001 et seq. (the “Texas Medical Practice Act” or the “Act”) for the purpose of practicing medicine in the State of Texas.
B. The Partners intend that the Partnership (as defined below) qualify as a legal entity composed solely of licensed physicians, in full compliance with Texas corporate-practice-of-medicine restrictions and fee-splitting rules.
C. In consideration of the mutual covenants herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Partners agree as follows:
2. DEFINITIONS
[// GUIDANCE: Add, delete, or refine defined terms as needed for the particular practice.]
“AAA” means the American Arbitration Association.
“Act” has the meaning set forth in the Recitals.
“Arbitration Rules” means the AAA Healthcare Payor Provider Arbitration Rules in effect on the Submission Date.
“Capital Account” means, for each Partner, the account maintained pursuant to Section 4.4.
“Distributable Cash” means cash available for distribution as determined under Section 4.3.
“Event of Default” has the meaning assigned in Section 11.1.
“Gross Revenue” means all cash and non-cash remuneration collected by the Partnership for medical services.
“Malpractice Claim” means any claim alleging professional negligence, lack of informed consent, or violation of the standard of care.
“Non-Compete Radius” means [] miles from the Practice Premises.
“Partner Vote” means the affirmative vote of Partners holding more than []% of Partnership Interests, unless another threshold is specified.
“Partnership” means the partnership formed under Section 3.1.
“Partnership Interest” means a Partner’s entire interest in the Partnership, including economic and voting rights.
“Practice Premises” means the principal office located at [ADDRESS], together with any satellite offices approved under Section 5.3.
3. FORMATION, PURPOSE, AND TERM
3.1 Formation. The Partners hereby form a general partnership under TBOC ch. 152 (the “Partnership”) effective as of the Effective Date. A Certificate of Assumed Name shall be filed, if necessary.
3.2 Purpose. The Partnership’s sole purpose is to practice medicine and provide ancillary services lawfully incidental thereto within Texas, in full compliance with (i) the Act, (ii) Title 22 Tex. Admin. Code Part 9 (Texas Medical Board “TMB” Rules), and (iii) all federal healthcare laws. The Partnership shall not engage in any activity prohibited by the corporate-practice-of-medicine doctrine.
3.3 Principal Place of Business. The Practice Premises shall be maintained at the address specified in the Definitions, or such other Texas location approved by Partner Vote.
3.4 Term. The Partnership shall continue until dissolved under Section 8 or as otherwise provided by law.
4. CAPITALIZATION; PROFITS, LOSSES & DISTRIBUTIONS
4.1 Initial Capital Contributions. Each Partner shall contribute the amounts and property listed on Schedule 4.1 on or before the Effective Date.
4.2 Additional Capital Calls. Additional contributions require a Partner Vote. No Partner shall be required to contribute additional capital absent such vote.
4.3 Profits, Losses, and Distributions.
(a) Allocation. Profits and losses shall be allocated among the Partners pro rata in accordance with their respective Percentage Interests set forth on Schedule 4.3.
(b) Distributions. Distributable Cash, determined quarterly, shall be distributed within 30 days after quarter-end, subject to (i) reasonable reserves, (ii) compliance with Tex. Occ. Code § 164.052(a)(17) (anti-fee-splitting), and (iii) any lender covenants.
4.4 Capital Accounts. A Capital Account will be maintained for each Partner in accordance with Treas. Reg. § 1.704-1(b)(2)(iv).
4.5 Compensation for Services. Partners may receive reasonable guaranteed payments for services, documented in Schedule 4.5, separate from profit distributions, provided such payments comply with 42 U.S.C. § 1395nn (Stark Law) and Tex. Occ. Code § 165.155 (Prohibited Referrals).
[// GUIDANCE: If the practice bills Medicare/Medicaid, add Stark Law and Anti-Kickback compliance language.]
5. MANAGEMENT & VOTING
5.1 Authority. Except as otherwise provided, all Partners have equal rights in the management and conduct of the Partnership.
5.2 Partner Vote. Matters outside the ordinary course require Partner Vote. Super-majority approval of [__]% is required for:
(a) Admission of new Partners;
(b) Merger, sale, or dissolution;
(c) Capital expenditures exceeding $[AMOUNT];
(d) Amendment of this Agreement.
5.3 Medical Director. The Partners shall elect one Partner as Medical Director for a renewable one-year term. The Medical Director shall supervise clinical protocols and ensure TMB compliance.
5.4 Practice Administrator. The Partners may engage a non-physician administrator for non-clinical functions, subject to Section 6.2.
6. PROFESSIONAL RESPONSIBILITY & COMPLIANCE
6.1 Licensure. Each Partner shall maintain an active, unrestricted Texas medical license, DEA registration, and, if applicable, DPS Controlled Substances Registration. Suspension or restriction constitutes an Event of Default.
6.2 Corporate Practice Restriction. No management services organization or non-physician entity shall exercise control over medical judgment. Administrative agreements must (i) be in writing, (ii) compensate at fair market value, and (iii) expressly reserve all medical decision-making to the Partners.
6.3 Fee-Splitting Prohibition. The Partnership and Partners shall not pay or receive remuneration in violation of Tex. Occ. Code § 164.052(a)(17). All marketing relationships must be vetted for compliance.
6.4 HIPAA & Privacy. The Partnership shall implement policies in accordance with 45 C.F.R. Parts 160 & 164 and maintain a written HIPAA compliance program.
6.5 Continuing Medical Education (CME). Partners shall complete TMB-mandated CME annually and provide certificates upon request.
6.6 Recordkeeping. Medical and financial records shall be retained for the greater of seven (7) years or the period required by 22 Tex. Admin. Code § 165.1.
7. INSURANCE REQUIREMENTS
7.1 Professional Liability Insurance. The Partnership shall procure and maintain occurrence-based medical professional liability insurance for each Partner with limits of not less than the Texas Medical Liability Act caps (currently $200,000 per claimant / $600,000 aggregate).
7.2 Tail Coverage. Upon withdrawal or termination, a Partner shall obtain tail coverage or prove continuation of coverage with equivalent limits.
7.3 General & Cyber Liability. The Partnership shall maintain commercial general liability and cyber liability policies in commercially reasonable amounts.
8. TRANSFER RESTRICTIONS; BUY-OUT & WITHDRAWAL
8.1 Admission of New Partners. Admission requires (i) Texas medical licensure, (ii) execution of a joinder, and (iii) Super-majority approval under Section 5.2.
8.2 Permitted Transfers. No Partner may sell, assign, or encumber any Partnership Interest without Super-majority approval, except to a revocable trust for estate planning provided the Partner remains sole trustee and beneficiary.
8.3 Voluntary Withdrawal. A Partner may withdraw on 180 days’ prior written notice. The Partnership shall redeem the withdrawing Partner’s interest at Fair Market Value determined under Schedule 8.3.
8.4 Mandatory Buy-Out. Upon an Event of Default or death, the Partnership may redeem the Partner’s interest at the Default Valuation Price set forth on Schedule 8.4, payable per the Promissory Note form attached as Exhibit A.
9. REPRESENTATIONS & WARRANTIES
Each Partner represents and warrants on the Effective Date and upon admission:
(a) Licensure. The Partner is duly licensed and in good standing with the TMB;
(b) No Restrictions. The Partner is not subject to any order, agreement, or investigation limiting professional practice;
(c) Authority. The Partner has full legal right and power to enter into this Agreement;
(d) No Conflict. Execution does not violate any other agreement or legal obligation;
(e) Accurate Information. All information furnished to the Partnership is true and complete.
Survival. The warranties in clauses (a)-(e) survive execution for a period of two (2) years.
10. COVENANTS
10.1 Compliance Covenant. Each Partner shall comply with all federal and state healthcare laws, the Act, and TMB Rules.
10.2 Non-Competition. For a period of two (2) years following withdrawal or termination, the Partner shall not practice medicine within the Non-Compete Radius, subject to Tex. Bus. & Com. Code § 15.50(b)(2) requirements (access to medical records and continuity of care).
10.3 Non-Solicitation. For two (2) years post-termination, a Partner shall not solicit Partnership employees or patients, except as permitted by law.
10.4 Confidentiality. Partners shall maintain the confidentiality of all PHI, trade secrets, and proprietary information in perpetuity.
10.5 Notice of Proceedings. Partners shall promptly notify the Partnership of any malpractice claim, licensure investigation, or exclusion from federal healthcare programs.
11. EVENTS OF DEFAULT & REMEDIES
11.1 Events of Default. Any of the following constitutes an “Event of Default”:
(a) Failure to maintain licensure or DEA authority;
(b) Felony conviction or admission of misconduct involving moral turpitude;
(c) Material breach not cured within 30 days of notice;
(d) Bankruptcy or insolvency;
(e) Revocation of hospital privileges materially impairing practice.
11.2 Remedies. Upon an Event of Default, the non-defaulting Partners may (i) suspend voting and distribution rights, (ii) initiate a mandatory buy-out under Section 8.4, and/or (iii) seek injunctive relief and damages.
11.3 Attorney Fees. The prevailing party in any action to enforce this Agreement is entitled to reasonable attorney fees, costs, and expenses.
12. RISK ALLOCATION
12.1 Indemnification for Malpractice. The Partnership shall indemnify, defend, and hold harmless each Partner against Malpractice Claims arising from Partnership activities, except to the extent caused by such Partner’s willful misconduct or gross negligence, and subject to available insurance.
12.2 Indemnification by Partner. Each Partner shall indemnify the Partnership and other Partners for (i) Malpractice Claims excluded under Section 12.1, and (ii) any penalties resulting from such Partner’s violation of law or this Agreement.
12.3 Limitation of Liability. Except for malpractice, fraud, willful misconduct, or obligations under Sections 8 and 12, the aggregate liability of any Partner to the Partnership and other Partners is capped at the greater of (i) the Partner’s aggregate capital contributions, or (ii) the amount recovered under applicable insurance.
12.4 Force Majeure. No Partner is liable for delays or failures caused by events beyond reasonable control (e.g., epidemic, natural disaster, governmental action), provided the affected Partner gives prompt notice and resumes performance as soon as practicable.
13. DISPUTE RESOLUTION
13.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Texas without regard to conflict-of-laws principles.
13.2 Forum Selection. Subject to Section 13.3, each party irrevocably submits to the exclusive jurisdiction of the state courts located in Travis County, Texas.
13.3 Arbitration. Any dispute arising out of or relating to this Agreement, other than requests for injunctive relief or collection of undisputed amounts, shall be resolved by binding arbitration administered by the AAA in Austin, Texas, under the Arbitration Rules. The award is final and may be entered in any court of competent jurisdiction.
13.4 Jury Waiver. To the extent a dispute is not arbitrated, the parties knowingly and voluntarily waive trial by jury.
13.5 Injunctive Relief. Nothing herein limits a party’s right to seek temporary restraining orders or injunctive relief in court to preserve the status quo pending arbitration.
14. GENERAL PROVISIONS
14.1 Amendment and Waiver. This Agreement may be amended only by a written instrument executed by Partners holding at least [__]% of Partnership Interests. No waiver is effective unless in writing and signed by the waiving Partner.
14.2 Assignment. No Partner may assign or delegate rights or obligations except as permitted under Section 8. Any prohibited assignment is void.
14.3 Successors and Assigns. This Agreement binds and benefits the parties and their permitted successors and assigns.
14.4 Severability. If any provision is held invalid, the remainder remains enforceable, and the invalid provision shall be reformed to the minimum extent necessary.
14.5 Integration. This Agreement, together with all schedules and exhibits, constitutes the entire agreement among the Partners and supersedes all prior understandings.
14.6 Counterparts; Electronic Signatures. This Agreement may be executed in multiple counterparts, each deemed an original. Signatures delivered by electronic means are binding.
14.7 Headings. Headings are for convenience only and do not affect interpretation.
14.8 Notice. All notices must be in writing and delivered (i) by hand, (ii) by certified mail (return receipt requested), or (iii) by nationally recognized overnight courier, to the addresses on Schedule 14.8, or as later designated.
15. EXECUTION BLOCK
IN WITNESS WHEREOF, the Partners have executed this Medical Practice Partnership Agreement effective as of the Effective Date.
| Partner | Signature | Date |
|---|---|---|
| [PARTNER NAME 1], M.D. | _______ | ____ |
| [PARTNER NAME 2], M.D. | _______ | ____ |
| [ADDITIONAL PARTNERS] | _______ | ____ |
[OPTIONAL NOTARIZATION BLOCK]
State of Texas §
County of ____ §
This instrument was acknowledged before me on _, 20_, by ________, M.D.
Notary Public, State of Texas
My Commission Expires: ____
SCHEDULES & EXHIBITS (Placeholders)
• Schedule 4.1 – Initial Capital Contributions
• Schedule 4.3 – Percentage Interests
• Schedule 4.5 – Guaranteed Payments
• Schedule 8.3 – Valuation Methodology
• Schedule 8.4 – Default Valuation Price
• Schedule 14.8 – Notice Addresses
• Exhibit A – Promissory Note (Buy-Out)
[// GUIDANCE: Attach detailed schedules and exhibits tailored to the practice’s specific financial terms and procedures before circulating for signature.]
END OF DOCUMENT